Making of a method
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With my recent focus on VAP, I have to be careful in not getting too attached to value at the expense of Price. A long long time ago, I remember reading what you said about the importance of taking Reversals only off key levels. It's starting to sink in some.
On another note - I was looking at some charts of NDX 100 stocks and spotted hints of Divergence. Some stocks were down a few days before the index dropped. Got interested in looking at NDX stocks after reading this:
http://www.ritholtz.com/blog/2011/02/qa-paul-desmond-of-lowrys-reports-2/
Do you track Divergence to give you a heads up at levels such as March NQ?
That's what all those NDX charts I've been posting are all about.
But those were very large caps - would not smaller caps be more indicative of Divergence?
I don't know what you mean by "divergence". AAPL topped out in December. GOOGL, AMZN, FB, CMCSA and GILD topped out in March. MSFT appears to have topped out three weeks ago. When only 3 out of the top 10 are holding their own, how much divergence does one need?
True that. Seems like a fantastic early warning system.
FT Day 157 April 22nd
Prep:
Slightly overbought with price having crossed UL on 60 min TC. Pace has been relatively slow over last couple of days. Not expecting a fast reaction. New High made ON was rejected and currently trying to make 2nd attempt to cross it. Trend is up.
http://www.sierrachart.com/image.php?l=1398179077981.png
Review:
1. Participating in a dull premarket does not work for me. I have to be available during premarket for the times when price is moving fast or when there is clear rejection. But otherwise, there is no need to dabble in it.Trading a dull market right before the Open throws my timing off.
2. Tried something different today in staying with the trade despite flat movement. Saw the slow pace and sideways movement as a sign of balance. Figured that I would not re-enter in a slow market like this. So there was value in leaving the position open, considering that the longer term trend was up.
Prep:
Slightly overbought with price having crossed UL on 60 min TC. Pace has been relatively slow over last couple of days. Not expecting a fast reaction. New High made ON was rejected and currently trying to make 2nd attempt to cross it. Trend is up.
http://www.sierrachart.com/image.php?l=1398179077981.png
Review:
1. Participating in a dull premarket does not work for me. I have to be available during premarket for the times when price is moving fast or when there is clear rejection. But otherwise, there is no need to dabble in it.Trading a dull market right before the Open throws my timing off.
2. Tried something different today in staying with the trade despite flat movement. Saw the slow pace and sideways movement as a sign of balance. Figured that I would not re-enter in a slow market like this. So there was value in leaving the position open, considering that the longer term trend was up.
http://www.sierrachart.com/image.php?l=1398192516729.png
In Market Profile terms, today's move shows value migrating up after repeated auctions. Adverse movement could not breach local POC's.
Should this kind of movement influence expectations? If so, it would require patience to hold onto the trade, betting that the migrating value will provide S on retracements. Even if price simply stalls, at least the risk of a sharp adverse move is low. Additionally, there is low opportunity cost since shorts do not look attractive against the buildup below.
In Market Profile terms, today's move shows value migrating up after repeated auctions. Adverse movement could not breach local POC's.
Should this kind of movement influence expectations? If so, it would require patience to hold onto the trade, betting that the migrating value will provide S on retracements. Even if price simply stalls, at least the risk of a sharp adverse move is low. Additionally, there is low opportunity cost since shorts do not look attractive against the buildup below.
http://www.sierrachart.com/image.php?l=1398259132296.png
Yesterday's upmove has increased the overbought state. ON action attempted to make new high but has since fallen back inside the TC, though still at the UL zone. 3588 presents clear R for any attempts to make it to the 3594/3600 level. Value is now established above price. The zone from 70 down to 50 shows lower volume. While the uptrend is intact, the overbought condition and R at 3588 put the present LOLR as down.
Yesterday's upmove has increased the overbought state. ON action attempted to make new high but has since fallen back inside the TC, though still at the UL zone. 3588 presents clear R for any attempts to make it to the 3594/3600 level. Value is now established above price. The zone from 70 down to 50 shows lower volume. While the uptrend is intact, the overbought condition and R at 3588 put the present LOLR as down.
FT Day 158 April 23rd
http://www.sierrachart.com/image.php?l=1398267705300.png
Review:
1. Too quick on the first Long Rev. LOLR was down and this demanded less aggressiveness on the long side.
2. Second long Rev was fine. But once again, use the larger down LOLR to modulate adverse management. That would have required a quick scratch once the move did not immediately take off.
3. A lot of trades had occurred yesterday at 52. Use this information to scale out once price retested the level at 0910.
4. Last lot should have been exited at 53. By now we were in a well defined Range. The downtrend had been flattened out. Even if I give the trade room here, there is no reason to stay once the retest does not break through.
http://www.sierrachart.com/image.php?l=1398267705300.png
Review:
1. Too quick on the first Long Rev. LOLR was down and this demanded less aggressiveness on the long side.
2. Second long Rev was fine. But once again, use the larger down LOLR to modulate adverse management. That would have required a quick scratch once the move did not immediately take off.
3. A lot of trades had occurred yesterday at 52. Use this information to scale out once price retested the level at 0910.
4. Last lot should have been exited at 53. By now we were in a well defined Range. The downtrend had been flattened out. Even if I give the trade room here, there is no reason to stay once the retest does not break through.